WASHINGTON (AP) – In the new emergency aid package is a piece that President Donald Trump has long had in the buffet of his economic wish list: restoring full tax cuts for restaurant business meals.
But experts say it’s an immediate help for an industry moving away from the pandemic, while critics ridicule it as an insensitive “three-martini lunch” for business.
The $ 900 billion pandemic aid package, which is heading to Trump’s office after Congress approved it Monday night, provides much-sought-after cash to businesses and individuals and resources to vaccinate a nation facing an increase in a virus that has killed more than 300,000 people.
The provision under the radar in the bill restores the full deductions appreciated by businessmen and lobbyists for refined meals and schmoozing. It could help at least the more tonic parts of the destroyed restaurant industry – eventually, when the economy recovers from the pandemic and depending on the strength of the return and consumer spending, experts say.
For now, the reality of social separation and restaurant closures imposed by local governments covers issues related to corporate tax.
Across the country, about 2 million restaurant workers have lost their jobs as a result of the pandemic, according to government data. If the current pace continues, a full recovery in employment will not be seen until the end of next year at the latest, according to the National Association of Restaurants. About 110,000 restaurants, or 17%, closed long-term or permanently, based on a survey conducted by members of the trade group.
The new tax exemption “is not really the help they need, but adds an insult to injury,” said Aaron Allen, who runs a Chicago-based restaurant consulting firm. “Airlines clearly have a better lobby in Washington.”
Americans for Fair Taxation said the break “will mostly help well-paid executives enjoy the three-martini lunches and the elegant restaurants they frequent. Nearby restaurants and their millions of laid off workers … will receive little or nothing. “
More immediate help for restaurants could be direct cash payments that will go into the pockets of consumers from the government under the new emergency package. Whether consumers remain too afraid of the virus to go to restaurants is an awkward question.
Many in the industry have asked for a $ 120 billion fund to provide grants to independent restaurants. This passed the house in October, but did not enter the final aid package.
“People are afraid to eat, go to an office or eat indoors, making these deductions unnecessary until there is a greater demand,” said Camilla Marcus, a founding member of the Independent Restaurant Coalition and owner of the West. (tilde) bourne, a New York restaurant that closed during the pandemic.
“Restaurants are fighting for our survival and what we need is to help us pay our bills now so we can put people to work tomorrow,” she said.
The timing of the economic recovery is important. Full tax deductions for business meals in restaurants or taken or delivered are temporary, only for 2021 and 2022 – unless extended by subsequent legislation.
The new break will cost taxpayers $ 6.3 billion in lost revenue, estimates the Congress’s nonpartisan Joint Tax Committee.
“We look at the business table deduction as a medium-term recovery investment,” said Sean Kennedy, executive vice president of the National Restaurant Association. “As we begin to return to a more ‘normal’ life cycle, the deduction will help with recovery.”
But the recovery has stopped. About 20 million people in the United States are unemployed and nearly 10 million jobs have been permanently wiped out since the March pandemic.
The president and Republican lawmakers, who are advocating for the restoration of corporate tax deductions, say this could help strengthen the restaurant industry.
Trump’s own tax law in 2017, accelerated by the then Republican majority in Congress, reduced the corporate income tax rate from 35% to 21%, but reduced or eliminated these deductions. A rare provision that was not suitable for business, halved the 100% deduction for business meals and eliminated it altogether for most entertainment expenses in places such as sporting and cultural events.
Deductions tend to favor state-of-the-art restaurants, the part of the industry that has been hardest hit by the economic downturn of the pandemic. This probably includes restaurants attached to its own dozens of luxury hotels and golf resorts in the US and around the world. In contrast, fast food restaurants and fast food and pizza chains were more likely to keep things going along with the delivery and delivery business.
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